Demand Response Programs: Demand Response Programs: Configuring - PowerPoint PPT Presentation

Demand Response Programs: Demand Response Programs: Configuring Load as a Resource for Configuring Load as a Resource for Competitive Electricity Markets Competitive Electricity Markets Charles Goldman E. O. Lawrence Berkeley National Laboratory CAGoldman@lbl.gov NARUC Winter Meeting Washington DC Feb. 13, 2002

Overview of Presentation Overview of Presentation • Key Policy Questions • Types of Demand Response Programs • DR Program Results: 2001 • Lessons Learned Energy Analysis Department

DR Programs and Electricity Markets - DR Programs and Electricity Markets - Policy Questions Policy Questions • How much demand response is needed? • What has been performance of markets in eliciting demand response? • Is this response sufficient to improve system reliability or economic efficiency? (e.g., value & costs of DR “insurance”) Energy Analysis Department

Demand Response Program Types Demand Response Program Types • C/I Non-firm Rates - Up-front payment; typically bill or rate discounts for curtailments to pre-set Firm Service Level • Direct Load Control - Utility interrupts customer loads (e.g., a/c, water heating) • Demand Bidding - Call option - Reservation and energy reduction payments - Customers selects Strike Price. LSE can “call” the customer, requiring them to reduce load or face penalties, when projected Mkt. Price > Strike Price • Demand Bidding - “Quote option” - Purely voluntary. Customers pledge to curtail loads at specified time, price (“pay-per-interruption event”) • Dynamic Pricing (e.g., real-time pricing) Energy Analysis Department

Case Studies of DR Programs Case Studies of DR Programs Independent System Operators - ISO NE, NYISO, PJM, CA ISO Utilities - Ameren, BGE, Cinergy, ComEd, Dominion Virgina, KCPL, Nevada, Otter Tail, NYSEG, PacifiCorp, PGE, PSE, SDG&E, Sierra Pacific, Xcel Energy, SCE, PG&E Retail Energy Suppliers/Aggregators (e.g., CSP) - AES NewEnergy, ConsumerPowerLine, Global Energy Federal Power Marketing Authorities - BPA Energy Analysis Department

System Events and DR Market Activity: System Events and DR Market Activity: Summer 2001 Summer 2001 Almost Daily Almost Daily Number of Curtaiment Events 35 Contingency Market 30 Programs Programs 25 20 15 10 5 0 R A D H C3 C4 E1 E2 I1 J1 L2 N2 N3 P2 S U1 U2 B C2 F G I2 J2 K L1 N1 O1 P1 Q T • 14 programs operated once or not at all • However, several programs played critical role in mitigating system emergencies Energy Analysis Department

Summer 2001 Wholesale Prices ($/MWH) Summer 2001 Wholesale Prices ($/MWH) 1000 Maximum 800 Average Post-Caps 600 400 200 0 East Lower MW Upper MW West Energy Analysis Department

Actual Performance of DR Programs: Actual Performance of DR Programs: Summer 2001 Summer 2001 800 Contingency Market 700 Programs Programs Potential 600 Curtailable 500 Load MW 400 Actual Average 300 Curtailed 200 Load 100 0 A C4 E1 E2 I1 J1 L2 P2 U2 C2 D F H I2 L1 P1 O Q • NYISO EDRP provided ~425 MW (L2) • CAISO only called once (E1,E2) Energy Analysis Department

Actual Performance of DR programs Actual Performance of DR programs Average Values for Case Study Programs Actual Potential Program Number of Actual/Potential Curtailable Curtailed Type Programs Load (MW) Load (MW) Contingency 8 158 84 62% Market 10 204 21 17% • Load relief from “market-driven” DR programs is often less predictable than “contingency- related” DR programs • Why? - - Incentive Mechanisms (e.g., penalties) - - Low wholesale electricity prices - - Definitional issues: Potential curtailable load? Energy Analysis Department

Back-up Generators: Balancing “ “reliability reliability” ” Back-up Generators: Balancing and environmental concerns? and environmental concerns? Contingency Market Potential Curtailable Load Programs Programs 800 700 Non BUG 600 BUG (MW) 500 400 300 200 100 0 T R A D H B F G K O Q S J1 L2 U2 L1 C4 P2 C2 P1 • BUGs are popular load curtailment strategy • Environmental impacts are major concern, particularly for diesel-fired BUGs Energy Analysis Department

What types of customers participate What types of customers participate in DR programs? in DR programs? Other Institutional 4% 9% Industrial Commercial 50% 23% Manufacturing 14% • Industrial customers are backbone of current DR programs in our sample • Increasing activity by commercial, institutional customers Energy Analysis Department

Current DR Programs target largest Current DR Programs target largest C/I customers C/I customers Small (<100 kW) Medium 8% (100-500 kW) 12% Very Large (>1 MW) Large 53% (500-1000 kW) 27% • Why? - metering, savings potential, transaction costs, program design rules • Challenge: tapping DR potential of medium/small customers Energy Analysis Department

Customer Load Reductions rescued Customer Load Reductions rescued CA during 2001 Crisis CA during 2001 Crisis 8,000 Reductions in Peak Demand (MW) = 8.6% average = 10.1% average 7,000 = 7.9% average = 6.3% average and Electricity Sales (GWh) Peak 6,000 Demand 5,000 Reduction 4,000 Electricity 3,000 Sales Reduction 2,000 1,000 0 Jan Mar May Jul Sep Nov • 6-8% reduction in electricity sales; 10% reduction in monthly peak demand • Data normalized for weather and economic growth (based on CEC analysis Energy Analysis Department

Contributing Factors to CA Demand Contributing Factors to CA Demand Reduction: Role of EE (Summer 2001) Reduction: Role of EE (Summer 2001) Utility Energy Efficiency Additional Electricity Programs Rate Increases (~300 MW) (~30% average) CEC Peak Load 20/20 Rebate Reduction Program Program (~100 – 200 MW) ~4000 MW Flex Your Real Time Power & Meters Media Campaign Voluntary Conservation and CAISO and Utility Demand Curtailment Initiatives at Gov’t Response Programs Facilities and Private Sector (~800 MW, 1 event) (~300 MW + ?) Energy Analysis Department

Performance of California Load Mgmt Performance of California Load Mgmt Programs during the Crisis Programs during the Crisis Stage 3 Emergency 2500 Stage 2 Emergency Total Curtailed Load (MW) No Emergency 2000 CPUC Suspended Program Operation 1500 1000 500 0 5/22/2000 6/14/2000 6/26/2000 6/27/2000 6/28/2000 7/19/2000 7/31/2000 8/1/2000 8/2/2000 8/14/2000 8/15/2000 8/16/2000 9/13/2000 9/18/2000 11/13/2000 11/14/2000 11/15/2000 12/4/2000 12/5/2000 12/6/2000 12/7/2000 12/10/2000 12/11/2000 1/9/2001 1/10/2001 1/11/2001 1/16/2001 1/17/2001 1/18/2001 1/19/2001 1/20/2001 1/21/2001 1/26/2001 2/12/2001 2/13/2001 2/14/2001 2/15/2001 2/28/2001 3/15/2001 3/19/2001 3/20/2001 3/27/2001 3/28/2001 3/30/2001 3/31/2001 4/2/2001 4/3/2001 5/7/2001 5/8/2001 5/9/2001 5/10/2001 5/31/2001 7/3/2001 • Interruptible Rate Programs operated 23 times in 2000 and 30 2000 2001 times in 2001 • GOOD NEWS: Critical to avoiding rotating outages on at least five occasions in 2000 • BAD NEWS: Frequent operation caused many customers to refuse curtailment requests and drop out Energy Analysis Department

Summary: DR Industry at Crossroads Summary: DR Industry at Crossroads • ISO programs growing in importance; but need to work out ISO roles/responsibilities in DR market - ISO DR Programs = ~1500 MW (2001) vs ~200 MW (2000) • Near-term outlook for “Market-driven” DR programs is unclear - New capacity additions + slowing economy = lower wholesale prices forecast for 2002 - Will there be much activity if customers require >$150- 200/MWh to bid in large amounts of load • Ambivalence & regional variations regarding role of backup and on-site generators (e.g., diesel-fired) • FERC Regional RTO Rulemaking – key forum for defining “rules of the game” Energy Analysis Department

DR Industry: Challenges & DR Industry: Challenges & Opportunities Opportunities • Key role of Intermediaries for long-term viability of DR market - Utilities: Incentives to perform?? - Retail energy suppliers: DR is not stand-alone business, so vibrant retail market is enabling condition - Curtailment Service Providers: niche players? Who will want to play – ESCOs? • Reposition existing Utility Load Management assets • Recognize that customers are NOT generators; loads are diverse & respond to multiple objectives • Making the case for “Public Benefits” value of “demand response” market Energy Analysis Department